Financial Data and Key Metrics Changes - Net sales grew 2% as reported and 4% in constant currency to $827 million [7][27] - Adjusted gross margin increased 130 basis points to 49.6% [7][27] - Adjusted EBITDA grew 7% to $57 million [7][27] - Adjusted loss per share improved by $0.02 to a loss of $0.03 [27][32] - Cash from operations was $25 million compared to $35 million in the prior year [32] - Free cash flow generated over the last twelve months was $582 million compared to $964 million in the prior year [33] Business Line Data and Key Metrics Changes - Dolls gross billings increased 2%, driven by Disney Princess and Wicked, while Barbie and American Girl were comparable to the prior year [28][15] - Vehicles increased 6%, with Hot Wheels growing 7% [28][15] - Infant toddler and preschool overall declined 5% due to planned exits in baby gear and Power Wheels, partly offset by growth in preschool entertainment [28][15] - Challenger categories overall increased 14%, driven by growth in Action Figures and Games [28][15] - Action Figures grew double digits, driven by Minecraft, Jurassic World, and WWE [28][15] Market Data and Key Metrics Changes - Gross billings increased 4% in North America, including double-digit growth in Canada [30] - EMEA increased 8% with growth across almost every market [30] - Asia Pacific increased 12%, driven by growth in Australia, India, and China [30] - Latin America declined 7%, reflecting the impact of retailers reducing inventory levels [30] Company Strategy and Development Direction - The company is focusing on diversifying its supply chain and reducing reliance on China-sourced products [8][9] - Plans to relocate production of 500 toy SKUs from China to other locations in 2025 [10] - Aiming to reduce U.S. imports from China to less than 15% of global production by 2026 and less than 10% by 2027 [13][9] - Committed to maintaining a strong balance sheet and executing a $600 million share repurchase program for 2025 [24][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mitigating actions to offset potential tariff impacts [23][41] - The company is pausing full-year 2025 guidance due to uncertainty in consumer spending and the evolving tariff situation [22][40] - Management believes the toy industry has historically proven resilient during uncertain times [23] Other Important Information - The company reported a strong first quarter with top-line growth and gross margin expansion [7][24] - The entertainment strategy is progressing, with several movies in production and partnerships with major entertainment companies [19][20] Q&A Session Summary Question: Can you outline the roadmap to offset the impact of incremental tariffs? - Management indicated that Q1 was not impacted by tariffs and does not expect Q2 to be affected, with potential impacts anticipated in Q3 [44] - Current exposure to tariffs is estimated at $270 million, before considering mitigating actions [45][46] Question: What flexibility exists in the supply chain to transition out of China? - The company has established a flexible, modular supply chain over seven years, sourcing from multiple countries [51][52] Question: How confident is the company in passing along pricing to retailers? - Management emphasized long-standing relationships with retailers and a strategic approach to pricing while keeping consumer value in mind [59][60] Question: What is the current state of inventory levels post-Easter? - Inventory levels are appropriate for this time of year, with retail inventories up slightly due to the later Easter holiday [80] Question: Have there been changes in retailer buying behavior? - No notable pull forward or cancellations have been observed, but some volatility is expected in gross billings due to direct import assessments [84][85]